Good News Out of Florida for Lessors
Decisions rendered by different courts in Florida provide good news for equipment lessors doing business in this state. One case supports a lessor's early termination charges challenged in a class action, and another supports the structure of a computer equipment lease as not being subject to documentary stamp taxes.
In The Marketplace
Highlights of the latest equipment leasing news from around the country.
FASB to Change Leveraged Lease Accounting Rules: LILO Settlements to Trigger Rerunning the Earnings
The Financial Accounting Standards Board met on Nov. 17, 2005 on the subject of the accounting impact of IRS settlements of Lease-In-Lease-Out ("LILO") and Lease-To-Service Contracts (aka "SILO"). To the surprise of the leasing industry, the FASB reached tentative conclusions that a change in the timing of cash flows requires a recalculation of the leveraged lease earnings and the lease classification should be re-examined. The recalculation of earnings results in a large, negative catch up adjustment and a positive adjustment to future earnings, but spread over the life of the lease. The lease classification issue should not be a problem.
A Senior Secured Lender's Guide to the Risks Posed By Junior Secured Debt
In theory, a borrower's issuance of junior secured debt is a boon for its senior secured lender. The borrower obtains additional capital, and the claims of the junior lender against shared collateral, since "subordinated," don't diminish the senior lender's prospects for repayment. In practice, however, a senior secured lender should view proposed junior secured financing skeptically because the existence of such debt can become highly problematic for the senior lender. The key to protecting the senior lender lies in properly negotiating and documenting the intercreditor agreement with the junior lender to eliminate, or at least minimize, the myriad ways in which the junior lender's rights may, in practice, limit — or even trump — those of the senior lender.
News Briefs
Highlights of the latest franchising news from around the country.
In the Spotlight: Internet Technologies Meet HVAC Components
Internet technologies are poised to revolutionize the heating, ventilation and air conditioning industry by enabling HVAC components to communicate not only with each other but with other building systems controls as well, and even with the enterprise business systems that have become essential to running large corporations, nonprofits and agencies.
Substance, Not Form, Dictates Characterization of Assignment of Lease
In a recent decision, the Tenth Circuit held that an assignment of lease and certain lease-related equipment was a secured transaction, and not a true sale, despite the execution of a bill of sale from the assignor to the assignee. <i>Stillwater Nat'l Bank and Trust Co. v. CIT Group/ Equipment Financing, Inc.</i>, 383 F.3d 1148 (10th Cir. 2004).
In The Marketplace
Highlights of the latest equipment leasing news from around the country.
Valuing Like Kind Exchanges: Is It Too Good to Be True?
How would you as a lessor like to increase your after tax income by millions of dollars? How would you as lessor like to increase spreads by 30 basis points? Would you like to do this without having to cut costs or take the risk of creating a new product, entering a new market and hiring lots of staff? The answer to these questions of course is "yes," and it sounds too good to be true as the way to get there is to use a gift from the IRS ' implement a Like Kind Exchange ("LKE") program in your leasing business.
